China to Enhance Financial Governance as Part of Reform Initiatives
China's financial sector innovations have resulted in changing demands and circumstances. It is essential to optimize the positioning and governance of financial institutions to create a collaborative system that strengthens their core missions, roles, and competitive service capabilities.
TroibNews 
**Editor's note:** Bruce Pang is chief economist of JLL Greater China. The article reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity.
In recent years, China’s financial sector has experienced ongoing progress in practical, theoretical, and institutional innovation. This progress has generated new scenarios and demands across various domains, including financial regulatory bodies, market participants, and financial activities.
It is vital to improve the positioning and governance of financial institutions and create a well-structured system that emphasizes division of labor and collaboration. This approach will enable financial institutions to stay aligned with their missions, return to core principles, clarify their roles, and leverage each other’s strengths, ultimately enhancing their competitiveness and service capabilities.
Accurate positioning, effective governance, and collaboration among financial institutions demand clear role definitions, strengthened cooperation, and coordinated development. This strategy optimizes the distribution of financial resources and fosters financial innovation. Additionally, it encourages the accumulation of new resources while facilitating the revitalization of existing ones. These efforts enhance the overall stability of the financial industry's operations and boost the competitiveness of its products and services, thereby better addressing society's need for diverse, comprehensive, and convenient financial services.
From a supply perspective, a well-defined financial institution system fosters clarity among market-oriented operational institutions regarding their roles and business boundaries. It aids in identifying unique industrial and regional advantages, differentiating services, and improving support for key areas and weaker links.
Regulatory-wise, this structure helps ensure the stable functioning of financial markets, effectively coordinate mixed operations with the separate regulation system, advance financial reforms, and prevent financial risks. Particularly, it supports strengthened centralized supervision, tiered management, and enhanced regulatory practices.
Currently, various financial institutions are encountering challenges such as imbalanced and insufficient development, limited international competitiveness, and inadequate service quality and efficiency for the real economy. Addressing these issues requires clarity in roles, a focus on core competencies, and the development of financial control tools that enhance market foundations, improve regulatory quality and efficiency, and offer more diverse and specialized financial products and services. This necessitates complementary efforts between state-owned financial institutions, regardless of their size.
Larger state-owned financial institutions should refine their key roles and responsibilities, shifting their focus from mere expansion to improving quality and strength. They must act as the primary force in supporting the real economy, leading the effort to build a strong financial sector, and maintaining financial stability. By providing premium services that emphasize major strategies, critical areas, and vulnerable sectors, they can enhance their specialties and strengths and receive favorable policy support, prioritized resource allocation, and efficiency guarantees, ultimately offering more effective and flexible funding for the real economy.
Conversely, small and medium-sized financial institutions must prioritize risk management and timely resolution of issues. Balancing reform efforts and risk mitigation during their development is crucial, as is addressing the challenges faced by high-risk small and medium-sized institutions. As these institutions deal with existing service issues, such as suboptimal product structures and unbalanced regional development, it is essential to enhance financing accessibility and convenience for small and micro enterprises, private enterprises, and agriculture-related businesses. By developing new models and business approaches for small and medium banks, local financial institutions, and non-bank financial entities, challenges related to financing constraints and costs can be tackled, ultimately bridging gaps in financial coverage, product offerings, and services.
James del Carmen contributed to this report for TROIB News
In recent years, China’s financial sector has experienced ongoing progress in practical, theoretical, and institutional innovation. This progress has generated new scenarios and demands across various domains, including financial regulatory bodies, market participants, and financial activities.
It is vital to improve the positioning and governance of financial institutions and create a well-structured system that emphasizes division of labor and collaboration. This approach will enable financial institutions to stay aligned with their missions, return to core principles, clarify their roles, and leverage each other’s strengths, ultimately enhancing their competitiveness and service capabilities.
Accurate positioning, effective governance, and collaboration among financial institutions demand clear role definitions, strengthened cooperation, and coordinated development. This strategy optimizes the distribution of financial resources and fosters financial innovation. Additionally, it encourages the accumulation of new resources while facilitating the revitalization of existing ones. These efforts enhance the overall stability of the financial industry's operations and boost the competitiveness of its products and services, thereby better addressing society's need for diverse, comprehensive, and convenient financial services.
From a supply perspective, a well-defined financial institution system fosters clarity among market-oriented operational institutions regarding their roles and business boundaries. It aids in identifying unique industrial and regional advantages, differentiating services, and improving support for key areas and weaker links.
Regulatory-wise, this structure helps ensure the stable functioning of financial markets, effectively coordinate mixed operations with the separate regulation system, advance financial reforms, and prevent financial risks. Particularly, it supports strengthened centralized supervision, tiered management, and enhanced regulatory practices.
Currently, various financial institutions are encountering challenges such as imbalanced and insufficient development, limited international competitiveness, and inadequate service quality and efficiency for the real economy. Addressing these issues requires clarity in roles, a focus on core competencies, and the development of financial control tools that enhance market foundations, improve regulatory quality and efficiency, and offer more diverse and specialized financial products and services. This necessitates complementary efforts between state-owned financial institutions, regardless of their size.
Larger state-owned financial institutions should refine their key roles and responsibilities, shifting their focus from mere expansion to improving quality and strength. They must act as the primary force in supporting the real economy, leading the effort to build a strong financial sector, and maintaining financial stability. By providing premium services that emphasize major strategies, critical areas, and vulnerable sectors, they can enhance their specialties and strengths and receive favorable policy support, prioritized resource allocation, and efficiency guarantees, ultimately offering more effective and flexible funding for the real economy.
Conversely, small and medium-sized financial institutions must prioritize risk management and timely resolution of issues. Balancing reform efforts and risk mitigation during their development is crucial, as is addressing the challenges faced by high-risk small and medium-sized institutions. As these institutions deal with existing service issues, such as suboptimal product structures and unbalanced regional development, it is essential to enhance financing accessibility and convenience for small and micro enterprises, private enterprises, and agriculture-related businesses. By developing new models and business approaches for small and medium banks, local financial institutions, and non-bank financial entities, challenges related to financing constraints and costs can be tackled, ultimately bridging gaps in financial coverage, product offerings, and services.
James del Carmen contributed to this report for TROIB News
